CAC 40: Pressure from 7,700 points intensifies

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After failing against a resistance zone that settled near 7,700 points at the beginning of the week, the CAC 40 continued its navigation in a range, with a certain volatility, in light of the nervousness of the market since the dissolution of the National Assembly by E Macron, which caused early legislative elections, with a new hemicycle divided into three blocks comparable in seat, with the risk that goes with it: that of political paralysis at best, and chronic instability at worst.

The session was marked by a new warning: that of Scor, on its life and health activity, due in particular to higher than expected mortality in the United States. The shares of the leading French reinsurer fell heavily, by almost 25%.

Ahead of the ECB’s monetary policy meeting (Governing Council) which will end on Thursday, Konstantin VEIT, portfolio manager at PIMCO, expects a meeting “without major events”.

“The strength of the labour market allows the ECB to take time to gather new information. As a result, the ECB is in no rush to cut rates further; decisions will be taken on a meeting-by-meeting basis, and the evolution of data over the coming months will determine how quickly the ECB withdraws additional restrictive measures.”

In the statistical chapter, investors dealt with the publication of the ZEW index of confidence in the German economy, which fell less sharply than expected, to 41.8.

“The economic outlook for the eurozone’s largest economy is deteriorating. For the first time in a year, economic expectations for Germany are falling. The fact that German exports declined more than expected in May, political uncertainty in France and the lack of clarity regarding the ECB’s future monetary policy have contributed to this development,” commented ZEW President Professor Achim Wambach on the survey results.

Meanwhile, retail sales, which measure U.S. household consumption, remained stable in June compared to May, when a 0.4% decline was expected over the month.

On the value side, luxury, already penalized yesterday by the British leather goods manufacturer Burberry and the Swiss watchmaker Swatch, lost further ground on the Paris Stock Exchange. The German Hugo Boss (-7.5% in Frankfurt) disappointed today. Kering lost a further 3.10%, Hermès 2.3% and LVMH 1.9%.

Across the Atlantic, major stock indices closed Tuesday’s session

An update on other risky asset classes: around 8:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1,0900. The barrel of WTI, one of the barometers of risk appetite on financial markets, was trading around $79.80.

On the agenda this Wednesday, to follow as a priority at 11:00 am the final data of the consumer price indices for June, and across the Atlantic, housing starts and building permits at 2:30 pm and the monthly report on industry at 3:15 pm.

KEY GRAPHIC ELEMENTS

The technical situation remains extremely fragile in the short term, with volatile oscillations expressed in a tidy between 7,465 and 7,700 points. In the event of a break of this first threshold, which corresponds to the lower limit of a former remarkable gap, an additional “purge” movement, the second, would take shape. We are doubling our caution as it approaches. The probabilities of an exit from the bottom of the range are higher than those of an exit from the top, due to the volumes and volatility at the entry on June 13 and 14.

FORECAST

Considering the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.

This bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 7700.00 points.

Hourly data chart

Daily data chart